Best ways to redeem rewards points over the holidays

It's challenging to budget during the holidays, what with
shopping, entertaining and family travel on the agenda. No wonder many of us
look to our reward points for a little help.

Gifts are top priority for most people this time of year. According
to Capital One's quarterly Rewards Barometer survey, 59 percent of holiday budgets
go for gifts, followed by meals (20 percent). Gift cards are among the most popular redemption options, along with cash
and domestic airline tickets. Travel accounts for only 11 percent of the
average holiday budget, but if you have a card that earns travel rewards, using
them now is a great way to save some cash for gifts.

So, how do you get the best return on your holiday points?

Take advantage of Cyber
Monday. About 43 percent of rewards cardholders will skip the trip to the
store on Black Friday this year, the survey showed. Thirty-two percent plan to
shop online instead, a third more than last year. Many retailers offer special
discounts on Cyber Monday, which is Dec. 2 this year.

If you're one of those planning to skip the long lines at
crack of dawn, check out CyberMonday.com. It has a listing of 800 online retailers
and the limited-time deals they're offering. You can use that information to
gauge whether it's a better deal to pay outright for an item or use rewards to
purchase it, and if it's the latter, how many points represent a fair exchange.

Register for revolving
categories. Rewards cards that offer 5 percent discounts for revolving
categories are aimed at holiday spending right now, mainly retail purchases. Now
through Dec. 31, Discover Cashback is offering a 5 percent bonus in online
shopping -- apparel, electronics, toys, gifts -- while Chase Freedom
cardholders can earn 5 percent cash back on up to $1,500 spent at
Amazon.com (including on Amazon Prime memberships) and department stores such
as JC Penney, Macy's and Sears. Shop through the Ultimate Rewards portal with
your Chase Freedom card and you'll get an extra 5 percent back, for a potential
total of 10 percent cash back.

Double-dip with gift
cards. Discounted gift cards are a great way to give someone more spending
power than you're paying for. American Express and Capital One are offering holiday deals of 10 percent to 20 percent off on select
gift cards purchased through their rewards websites, and Discover promises to increase "or even double"
your cash back rewards with
gift cards from more than 150 partners, including retailers, gas stations and
restaurants. Chase Freedom is also offering deals on gift cards through the end of the year.

If you want to maximize return on your gift card investment,
consider buying discounted gift cards and then using them to buy gifts. For
example, 2,250 Ultimate Rewards points would normally be worth $22.50 in cash,
but if you use them instead to get a $25 Kohl's gift card, you're getting a 10
percent savings. If you then use that gift card to buy merchandise on a 10
percent-off sale, you've shaved 20 percent off your purchase price.

Shop through a rewards
portal. The easiest way to get an extra payoff is to remember to start your
online shopping at the portal of your rewards program -- the site often referred
to as "the mall." Shopping through a rewards portal may not save you money
during the holidays, but you can bank some rewards for later, when you're
really tapped out.

When customers shop online and not through the [credit card rewards] mall, they're
effectively missing out on their incremental earn.

--
Jennifer
Roberts
President, Affluent and High Net Worth, Chase

The biggest missed opportunity by cardholders, says Jennifer
Roberts, president of affluent and high net worth business at Chase, is buying
directly from online retailers instead of going through the Ultimate Rewards
portal. "When customers shop online and not through the mall, they're
effectively missing out on their incremental earn," says Roberts. "They may be
shopping some of the merchants we offer and we can see those transactions come through,
but we don't see them coming through our mall. So, a lot of times they're
missing out on up to 10x incremental earn in terms of points."

Use a third-party
tracker. If you have points and miles spread out over several programs, you
can compare the payoff for a particular purchase with a site such as evreward. Type in the e-commerce site you're
about to buy from and it will show you which rewards programs are offering
bonus points for that retailer. Evreward tracks more than 40,000 rewards and
coupons for more than 10,000 online retailers and services, and allows you to
compare deals at a glance.

Book holiday travel
through a rewards portal. If you are planning to travel during the
holidays, travel rewards often offer the best bang for your point. For example,
if you transfer your Chase Ultimate Rewards points to your United Mileage Plus
account, you could get a round-trip United flight from New York LaGuardia to
Los Angeles for 50,000 points (departing Dec. 20 and returning on the 28th).
That same flight costs nearly $800 if you buy it with cash, making the travel
reward a much better deal than if you used those 50,000 points on, say, the $500
TV being offered through Ultimate Rewards.

If you focus on one card, you're able to build up a larger pool of rewards that you can then you can use for bigger purchases, bigger rewards redemptions.

-- Amy Lenander
Capital One vice president, rewards programs

The same principle holds true for other programs such as American Express Membership Rewards.

Dig up forgotten points.
Spokespeople from both American Express and Capital One say the most common
mistake cardholders make with rewards is not
redeeming them. "Customers are most likely to remember to use the rewards on the
card they use the most," says Amy Lenander, vice president of rewards programs at
Capital One. "But they probably have rewards sitting around in places they
don't remember that they can get some utility from at this time of year --
either to buy gifts or to supplement some of the travel they're doing."

Keep it simple. Life
can get crazy this time of year and some consumers prefer to avoid the hassle
of juggling multiple reward programs. If this describes you, it might make
sense to pick one card and focus your efforts. "I think it's important for customers
to understand which of their cards gives them the most value all the time,"
says Lenander. "If you focus on one card, you're able to build up a larger pool
of rewards that you can then you can use for bigger purchases, bigger rewards
redemptions."

If you opt for simplicity, make sure you have a card that
offers rich rewards on the things you're most likely to spend money on, and
lots of flexibility to use them when and how you want to. Avoid rewards that
expire or come with blackout dates.

Give to charity. While
most of us focus our spending on one main card, we often leave points
stagnating in less-used loyalty programs. What to do with the about-to-expire 4,000
miles on that airline you rarely fly? If giving back is one of your priorities
this time of year, you can always donate those points to charity. Most major
card issuers and loyalty programs make that fairly easy to do, with a minimum donation
of 1,000 miles.

Published: November 11, 2013

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